UPS targets global boost from TNT deal

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UPS expects to get a substantial boost to its international business from the 5bn euro takeover of TNT Express.

At the moment about a quarter of the group’s sales come from outside the United States – this will increase to about 36 per cent as a result of the deal.

UPS is paying 9.5 euros per share – a premium of 53.7 per cent on the TNT share price before the offer was announced. It values TNT Express at 5.16 bn euros.

UPS reckons it will take four years and cost one billion euros to merge its operations with TNT Express.

However, it expects to find annual savings of 400 to 550m euros by the end of the fourth year of integration.

TNT’s largest shareholder PostNL which holds 29.8 per cent of the TNT shares, has agreed to sell its shareholding under the terms of the deal.

It is still possible that another bidder, such as FedEx, could step in but, given the premium that UPS is paying, this seems unlikely.

UPS said the deal would result in a group with worldwide sales of more than 45bn euros and the integration of the TNT European road network would expand UPS’s logistics services in Europe.

UPS intends to finance the 5.16bn euro offer with 2.3bn euros in existing cash on balance sheet and through new debt arrangements.

TNT customers will have access to UPS’s comprehensive US network as well as its portfolio of freight forwarding and distribution services.

[asset_ref id=”1509″] Scott Davis

Scott Davis, chairman and chief executive of UPS, said: “With this combination, both UPS and TNT Express will significantly enhance their ability to serve our combined customers’ complex global logistics needs. The additional capabilities and broadened global footprint will support the growth and globalization of our customers’ businesses. At the same time, this positions us for future growth, which will benefit our employees and shareowners.”

And TNT chief Marie-Christine Lombard said: “To my 77,000 colleagues I say that the combination will create unique opportunities for development and growth in which we can participate.”

Merging the two networks will be a massive task involving planning on a facility by facility basis. The two networks will run in parallel for a period.

UPS said it would adopt and country by country approach. Customer alignment would come first followed by operational integration.

Most efficient and value added operating facilities and practices – TNT or UPS – would be retained, it said.

The areas targeted for efficiency improvement include driver operations,  hub / feeder operations, air network combination and ground handling.

UPS will also be looking for procurement synergies, standardization of processes and support function efficiencies.

It will take several months to complete the deal. The offer period will start in the second quarter and close in the third quarter of 2012.

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